Article
Brochure
Executive Resource
Insight Hub
Ext. Publication
VideoSales and Use Tax Developments in Arizona and Utah: Nexus Simplification and Tax Reform
Never miss a thing.
Sign up to receive our Tax News Brief newsletter.
Sales and Use Tax Developments Across the Western U.S.
State tax policy across the western United States saw notable activity throughout 2025 and into early 2026. While some states expanded tax bases or faced significant litigation, others focused on administrative clarity and modernizing tax systems.
Arizona and Utah recently enacted changes that may simplify certain compliance requirements for businesses operating across state lines, particularly in the areas of economic nexus and tax administration.
Arizona
Adjusting the Transaction Privilege Tax landscape
Arizona’s tax structure differs from traditional sales tax systems because it imposes a transaction privilege tax (TPT) on the privilege of conducting business in the state. Several recent developments may help businesses better understand and administer their tax obligations.
Repeal of Residential Rental TPT
Beginning January 1, 2025, municipalities may no longer impose TPT on long-term residential rental income. The change standardizes treatment across jurisdictions and aligns municipal policy more closely with the state’s approach. Short-term rentals and commercial leases remain taxable.
Nexus and sourcing guidance
Arizona’s Department of Revenue also issued guidance clarifying economic nexus rules for remote sellers. The threshold remains $100,000 in gross retail sales, and only retail transactions count toward that threshold.
The guidance reinforces Arizona’s post-Wayfair framework and provides additional clarity regarding when businesses may be required to register and collect TPT. Businesses should also remember that physical presence and affiliate nexus standards remain important considerations. For example, recent litigation involving RockAuto reinforced Arizona’s broad interpretation of affiliate nexus and underscores the importance of evaluating in-state relationships that may create filing obligations.
Other administrative changes
Arizona also extended deadlines for certification of third-party sourcing providers and introduced exemptions for certain youth-operated businesses with limited gross receipts.
Utah
Continuing the shift toward simpler nexus rules
Utah recently adopted changes that align its economic nexus standards with an emerging national trend.
Eliminating the transaction threshold
Beginning July 1, 2025, Utah eliminated the 200-transaction economic nexus threshold for remote sellers. Businesses are now generally required to collect and remit sales tax only if they exceed $100,000 in annual sales into the state.
This change may simplify compliance for businesses that previously exceeded transaction thresholds despite having relatively modest sales volumes.
Broader tax reform measures
Utah also enacted a broader tax reform package that included modest reductions to corporate and individual income tax rates.
In addition, the legislature revised sourcing rules for financial institutions by removing certain investment income from Utah apportionment calculations.
Key Takeaways for Businesses
Arizona and Utah reflect an emerging policy trend focused on administrative simplification and modernization of tax systems rather than broad expansion of tax bases.
Businesses with multistate operations should consider the following actions:
- Reevaluate economic nexus footprints as states continue to modify threshold standards
- Confirm whether transaction counts remain relevant when monitoring nexus obligations
- Review Arizona-specific TPT requirements separately from traditional sales tax rules
- Monitor state-specific administrative changes that may affect registrations, sourcing methodologies and exemption eligibility
- Periodically reassess physical presence and affiliate nexus footprints
As state tax rules continue to evolve, businesses should regularly revisit their compliance processes to ensure they remain aligned with changing requirements across jurisdictions.
For more information about state and local tax law changes in Arizona and Utah, contact us.
Authored by Marshall Ferris
©2026
Sales and Use Tax Developments Across the Western U.S.
Sales and use tax policy across the western United States saw significant activity in 2025 and early 2026. This four-part series reviews major legislative, administrative and judicial developments affecting businesses operating in Colorado, Washington, Arizona, Utah, New Mexico, Wyoming and Idaho.
